Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.

Dueling Fools: Chipotle Bear

I'll take the burritos, but pass on the stock.

My place as the Chipotle (NYSE:CMG)(NYSE:CMG-B) bear in this edition of Dueling Fools has nothing to do with my taste buds. I really enjoy the burritos at this fast-casual fresh-Mex restaurant, and it's hard not to be impressed by the rapid (if decelerating) growth the chain has posted in recent years. All the same, some aspects of Chipotle give me indigestion.

Would you like a badonkadonk with that burrito?In my former life as an investment banker, I found the Chipotle around the corner a perfect place to grab a quick, tasty lunch. But by the time I had finished my midday treat, I felt like I'd been hit by a train and had to fend off sleep for the rest of the afternoon. As it turns out, my lunch -- a burrito with rice, black beans, chicken, two types of salsa, sour cream, and cheese -- clocks in at a whopping 1,192 calories and 48 grams of fat (18 grams of which is saturated fat), according to Chipotlefan.com. That's more calories and saturated fat than a Big Mac and a large fries at McDonalds.

Some of you may be thinking, "Yeah, but a Burrito Bol, sans tortilla, rice, cheese, and sour cream, can bring those calories way down." That's true, but in all the times I've been to Chipotle, burritos have seemed by far the more popular selection. Besides, how many people in the financial district of San Francisco really need a 1,000-plus-calorie lunch?

Historically, unhealthy products haven't necessarily hurt the companies selling them -- just ask McDonald's, Anheuser-Busch (NYSE:BUD), or Altria (NYSE:MO). It's questionable whether Chipotle's waist-padding food could hurt the company as America tries to get healthier, but I have to wonder whether some customers realize that the chain's "Food With Integrity" motto doesn't extend to keeping its patrons healthy.

The value of huge, delicious burritosDigging into Chipotle's numbers makes you marvel at how well the company has grown. Year-over-year revenue growth in 2004 was just about 50%, and though it's been declining since, revenue over the trailing 12 months is up almost 30% compared with the previous 12-month period. This is definitely healthy growth.

Still, I'd argue that with a P/E of 45 on 2007 expected earnings, and 55 on trailing earnings, that growth has been priced into the stock. For comparison, fast-food firms like Sonic (NASDAQ:SONC), Jack in the Box (NYSE:JBX), and Yum! Brands (NYSE:YUM) all trade at forward P/Es in the low-to-mid 20s.

On the cash flow statement, Chipotle is producing significantly more cash than net income -- not a bad thing! Management hasn't been shy about shelling out that cash to set up new restaurants. Over the past 12 months, Chipotle has spent all of the $111 million in cash it produced from operations, plus another $4 million, on capital expenses.

Remember, Fools, that this spending won't continue forever. As Chipotle slows its growth over time, it'll end up spending less on capital expenditures, while its operations will presumably continue gushing cash. The big question is what that future potential is worth to investors today. Noodling around with the numbers for Chipotle, I find that even the most generous estimates suggest that the company's still slightly overvalued at present.

My flavor of bearMy bearishness on Chipotle doesn't mean I plan on shorting the stock -- or recommending that others should. I wouldn't even recommend that Fools who bought Chipotle at a lower price should sell it now. It's not that overvalued.

My bear prefers to just stay away right now. Chipotle is undoubtedly a very promising company, but the market hasn't exactly overlooked that. Mr. Market's asking price for the stock right now leaves no room whatsoever for error, and that's not where I like to step in. Keeping Chipotle on the radar until it's offered at a better price sounds more appetizing to me. Meanwhile, there are plenty of other stocks worth nibbling on.

Fool contributor Matt Koppenheffer doesn't eat Chipotle's burritos nearly as often as he used to, but he still indulges on occasion. He does not own shares of any of the companies mentioned. The Fool's disclosure policy, being immune to weight gain, loves Chipotle burritos without reservation.